Easyjet Case Study

Introduction

Easyjet is Europe’s leading airline. A budget airline formed in 1995, it has grown rapidly to become for the fourth largest carrier in Europe, serving over 75 destinations in Europe. Sales turnover was 1,488.0 million (1996) and sales growth of 17.9%. Easyjet currently employs over 4,500 employees.

Reasons for Success

Easyjet was particularly successful because it identified a niche in the market for low price short haul flights that would suit leisure and business customers. It was based on the premise that airline flights were price elastic, if you reduce the price, more people would fly. This was certainly the case for the airline.

Easyjet made the choice in pursing a differentiation strategy. While, British Airways differentiated upwards during 1990’s - offering premium services (including lounges, best customer service, in-flight meals) which commanded premium prices. Easyjet differentiated downwards - taking out unnecessary services, just providing a basic A to B airline service with a smile, and thus offered flights at lower prices. Customers valued the lower prices, and the airline market expanded in the quantity of passengers as a result of this new product offering.

Easyjet was particularly successful because it had tight reign on costs and overheads. It could make savings where other airlines could not. For example: i) Easyjet maximised the utilization of assets - with faster turnaround on flights ii) it only flew its aircraft point to point, with no connecting flights - thus it did not incur the costly ticketing procedures associated with flight connections iii) it had no ticketing (paperless office) - customers used e-mail reference numbers to board flights. All these aspects helped to keep its costs to the minimum.

Easyjet had effective branding. The brand was developed quickly and it soon obtained recognition for being a “value” airline that was safe. The orange “Easy” brand was very effective. Stelios, was focused at making sure that Easyjet was seen as pro-active airline - one that was focused on limiting the impact on the environment and offering the best possible value for its customers. It delivered on its promises.

Easyjet was a pioneer in the use of the internet to both advertise and retail airline tickets. Its Information technology infrastructure had a unique demand and sell application which determined the price of the airline ticket - and helped to ensure flights remained full. Bookings by customers were made online and customers did not need to receive tickets through the post, providing further cost savings. IT infrastructure enabled costs savings, 95% of tickets are currently sold online and information sharing across the business has assisted strategic decisions.

Challenges and Outlook

The airline is still susceptible to the economic shocks as with other airlines. Due to its functional policies aimed at keeping costs down, it is better positioned. Fuel prices (e.g. rising cost of oil), costs associated with security measures and complying with government legislation (e.g. environmental considerations) still affect costs, and the price savings that can be passed on to customers.

There is saturation within the UK and European airline market. Competitors have copied Easyjet strategy and launched “me too” airlines, “fighter brands” with similar low price strategies, that have intensified competition. Legislation has made it easier for foreign airlines to operate within national countries.

Easyjet has looked to new destinations and new areas of business (to include hotels, rental cars) to maintain profit and growth levels.

Despite changes in the social environment - where consumers have greater leisure time (consumers taking 2 or more holidays per year and weekend breaks abroad). Changes in the economy, including a possible recession, aswell as further security breaches, may suppress demand in the short term for airline travel.